DIY super: What you need to know about SMSFs
Written and accurate as at: May 14, 2025 Current Stats & Facts
As the name suggests, a self-managed super fund (SMSF) is a type of private super fund that you personally manage. But running your own super isn’t as simple as setting up a few investments and watching them grow.
Under an SMSF, members also serve as trustees. This means they’re responsible for operating the fund, investing its assets, and making sure it follows all the relevant tax and super laws.
For those who value control and flexibility, SMSFs can certainly be appealing. But the benefits will need to be weighed up against the workload and all the risks involved.
If you're thinking about managing your super, here are a few things to keep in mind.
How SMSFs work
Running an SMSF is a bit like being the CEO and investment manager of your own super fund. Unlike conventional super funds — which let members choose from a handful of investment options but take care of the buying and selling themselves — SMSF trustees have visibility and control over every decision the fund makes.
Of course, that doesn’t mean they can do whatever they like with the money. SMSF trustees have to adhere to the ‘sole purpose test’ — that is, they must make sure all decisions are in the best financial interests of all members.
But even with all the rules and regulations, SMSFs offer a surprising degree of freedom. For example, you’ll have the ability to invest in assets that are typically off-limits to regular fund members, like residential real estate, artwork, and even collectibles like stamps and coins.
Some business owners even use SMSFs to purchase commercial property and then lease it back to their business. That way, the money that would otherwise be going to a landlord is being put towards their retirement savings instead.
Weighing up the pros and cons
Some reasons SMSFs might be attractive to investors include:
- You’ll have a wider range of investment options.
- You’ll be able to tailor your investment strategy according to your goals and circumstances, as long as you comply with all the rules.
- SMSFs can have up to six members, allowing you to invest in assets that might be unavailable to you on your own.
- While SMSFs are taxed like regular super funds, you might be able to lean on certain tax strategies to boost your retirement nest egg.
Of course, SMSFs won’t be suitable for everyone. Some of the downsides include:
- SMSFs have strict rules and there are penalties for non-compliance (including legal action, having your assets frozen, and having your fund’s complying tax status revoked).
- Disputes between members, or events like illness and death, can affect how your SMSF operates.
- If you fall victim to theft or fraud, you can’t count on the government compensation typically available to large super funds.
- SMSFs require a lot of time and attention (including keeping up with market trends and the latest super and tax laws).
- You’ll need to keep detailed records and arrange for yearly audits.
- The returns your SMSF generates might be more disappointing than a traditional fund.
- The costs of running your SMSF can be high, especially if the value of its assets are still low.
Whether an SMSF is right for you will depend on a number of things — your financial goals, how comfortable you are making investment decisions, and how much time you’re willing to spend handling all the legal and administrative responsibilities.
You might find being in the driver’s seat empowering, but it’s important to know what you’re getting into. Before you make the leap, be sure to seek financial advice.
